The present invention relates generally to a checking account system.
As information technology continues to expand and flourish, and as new legislation continues to be enacted to address this growing technology, the banking and insurance industries must also diversify their methods and products to sustain and/or expand their customer bases. Accordingly, the development of new products and systems that will provide these results has is of high priority to modern banking and insurance.
Banks think and sell positively as far as checking accounts and related services go. Banks are not trained to sell negatively, as the insurance industry does. Unfortunately, the insurance industry has to sell protection against really bad things happening to customers and their loved ones. Furthermore, to get the benefit, those insured usually have to die. Accordingly, banks are better positioned to provide new products and methods to customers.
Probably the most significant banking product to most people is the checking account. Also known as banking's flagship product, the checking account is to most people the primary repository of net earnings from month to month. As such, checks and debits drawn against the account represent the life style that account holder can afford, or at least the lifestyle they are trying to afford. As bankers focused on processing transactions and selling new services to attach to an already cluttered checking account, they often forget that these checks represent real life events, both routine and special for the account holder. These events thus often carry with them tremendous positive and negative emotions—checks written to pay for a child's college tuition, a mother's funeral, a young couple's first down payment on a new house, alimony, court settlements, groceries, tithes to churches, etc. Millions upon millions of real life events pass through the bank's reader-sorters in tangible form every night. Those little 2¾″ by 6″ pieces of paper and automatic payments, therefore, truly do embody the hopes, dreams and fears of our account holders. For them, the monthly bank statement long ago became the de facto report card on whether or not they are winning or losing at the game of life. Therein is the untapped potential of the checking account.
Banks have much invested in making the checking account cost effective, easy to use, and necessary. Over the years, the checking account has evolved from passbooks, to checks, to personalized checks, paper drafts, paperless payments (ACH), automatic payroll deposit, interest on checking (this one really broke bank's hearts), overdraft credit lines, debit cards, online banking/bill payment, free checking, toasters, from simple to complex service charge routines, automatic transfers to savings, etc. If a bank product team can think of it, a bank somewhere has done it. The result has been the increasing complexity and commoditization of checking accounts. Outside the industry, the commoditization continues with the granting of checking account powers to credit unions, savings banks, and brokerage houses. Now, most any group can offer checking accounts, much to the chagrin of bankers. This kind of stress on checking account margins causes banks to continually seek out new ways to reduce processing costs. Most recently, this has manifested itself in the Check 21 law (“Check 21”) and float reduction initiative.
The Check 21 law was a watershed event. As watchdog groups analyze the impact of this sea of change in check clearing on individual consumers, demands are being placed on banks to provide an accounting of how much money they are making or saving. The monthly account earnings credit on personal checking accounts is suddenly on the table. Bankers are used to communicating to those with commercial accounts about receiving services and benefits as a function of excess collected balances. Banks, however, have avoided this communication with personal account-holders. Accordingly, the ultimate fallout from Check 21 likely will be a revolution in how bankers and consumers look at personal checking accounts. It is likely that banks Will eventually have to provide more benefit for collected funds.
With the advent of Check 21, if something disrupts the lives of banking customers and banks fail to deposit on time the required funds to support the life style commitments of these customers, the automation, convenience and speed of processing suddenly will come back to hurt banks. The stage is now set for each party's view of the other to permanently change for the worse. Personal checking account now takes center stage in a drama that will quite possibly end the customer's relationship with the bank. The deposit challenged account becomes something like a fast moving freight train: very hard to stop before the damage is done! As the dominos begin to fall, the account and the account holder's life is damaged.
In a perfect world the bank can say, “That's what overdraft checking and cash advances off credit cards are for. You shouldn't spend more than you have in the bank.” However, the bank has enticed and then addicted the account holder to easy credit, such that many consumers live at or near the top of their “emergency use” credit facilities. Adding additional consumer debt usually only exacerbates the downward spiral anyway; particularly if the account holder's normal deposit flow is interrupted for an extended period of time. Unforeseen life events such as job loss, account breakup due to divorce or extended separation, short-term unemployment due to health issues, or the death of a breadwinner in a joint account are beyond the reach and intended use of emergency credit. Granted, account holders to varying degrees have coverage for some of the above. The problem is the time involved in claiming those benefits. When the money does come, it's usually too late and too small to avoid damage to the account holder's relationship with the bank, other creditors and their credit history.
As the dominos continue to fall, data is now being accumulated that causes the bank to wonder if it even wants the account. The consumer begins to associate the bank with NSF notices, OD notices, and late notices. Messages are left on answering machines that further anger or embarrass the customer. Tellers give those funny looks and are not as friendly. Everyone seems to know the account holder is in trouble. Other non-bank creditors write or call and say “The bank returned your check or the bank dishonored your draft.” These temporary circumstances are now working against the bank keeping the account. This is important because in today's model, the broker and the carrier assume all the risk and pay all the campaign costs. In fact, insurance departments brag that they make the bank money without spending money. Everything is now working against the bank keeping the account. Banks have much invested in making the checking account cost effective, easy to use, and central in the account holder's mind for making the consumer side of life happen. The bank's investment is the use of its brand and customer mailing lists. Insurance department promotions through these third party brokers are not considered core to the banks mission and are often viewed as red headed stepchildren. The bank's attitude is, “As long as we don't have to do any work, its low risk, and if we make money, fine, no harm done, and if no one buys the offer, the broker and carrier lose, not us.” This attitude minimizes potential account holder profit contribution because it marginalizes the value of a valuable “captive” customer touch point. Customer retention and satisfaction are put at risk by offering inferior products at inflated prices.
Over the years, the checking account has evolved from passbooks, to checks, to personalized checks, paper drafts, paperless payments (ACH), automatic payroll deposit, interest on checking (this one really broke bank's hearts), overdraft credit lines, debit cards, online banking/bill payment, free checking, toasters, from simple to complex service charge routines, automatic transfers to savings, etc. In short, if a bank product team can think of it; it has been done by some bank somewhere. Within the industry, the result has been the rampant addition of complexity to checking account offerings and their commoditization. Outside the industry, the commoditization continues with the granting of checking account powers to credit unions, savings banks, and brokerage houses. Now, most any group can offer checking accounts, much to the chagrin of bankers. This kind of stress on checking account margins causes banks to continually seek out new ways to reduce processing costs. Most recently, this has manifested itself in the Check 21 law and float reduction initiative. Accordingly, it might not be long before banks have to give direct and measurable benefit for collected funds. Banks thus need to take the initiative.
Insurance companies must also take initiative. The entire process of insurance is awkward, fraught with time delays, errors, multiple handoffs, and unnecessary expense. This process has become the biggest deterrent to offering anything but the most basic low yield products. The result is low response and even lower conversion for high campaign execution expense. The industry, as a whole, is continuing to do things the same way they were 30 years ago. Entrenched processes and associated inefficiencies rule the day. Mail boxes are cluttered with simplistic “dumbed-down” look a like offers with little appeal and usually perceived by the consumer as having suspect value. Often, list age and quality issues lead to multiple identical offers going to the same customer. Many bank brands, have as a result, been cheapened by their association with “junk mail” promotions of low value offerings and bad customer service by the third parties.
Products designed for complex integration and execution go counter to this attitude. Traditionally, every effort is made to “make it simple and easy” for the bank's insurance department to get name and address lists of certain demographic profiles or new accounts, etc. from the IT department. Anything with any degree of complexity is either going to take a long time to get through the bureaucracy or not get done at all. Once again, since insurance sales are not viewed as core to the account relationship and the banks desire to grow that relationship, the less help from the bank you need the better. Integrating life insurance benefits into the core account value proposition is on no ones radar screen. Certainly not in the bank and probably not on the mind of the broker since integrated benefit execution is so complicated.
Accordingly, there exists a need for a new and improved product and method that can enhance the services provided by both banks and insurance companies.